Now the Christmas rush has finished, many businesses will be looking to increase business with prize promotions including competitions and prize draws. Many will not realise that there is a fine line between running prize draws and competitions and running an illegal lottery.

Some questions to consider:

  • Will there be a distribution of prizes?
  • Will there be a fee to enter?
  • Is the winner picked by chance or will there be a significant element of skill required to win?

If the winner will be picked by chance and participants have to pay a fee to enter the promotion, then chances are that you are running an illegal lottery. A fee can be by way of a premium rate telephone call or text line or a requirement for users to give consent to their personal data being transferred to third parties or used for marketing purposes (i.e. not being presented with a choice).

To avoid an illegal lottery you should consider the following:

  • Retaining an element of chance but ensuring that there is a method of entering the prize draw free of charge.
  • Retaining a fee but making it a competition where the winner will be selected by showing a significant skill.

If you wish to run a lottery you must either hold a licence or fall under the list of exemptions included in Schedule 11 of the Gambling Act 2005.

If you do wish to run a free prize draw or a competition then you must comply with the Committee of Advertising Practice (CAP) UK Code of Non-Broadcasting Advertising Sales Promotions and Direct Marketing (CAP Code). Under this Code you must ensure that the terms of the prize promotion are clear and well publicised.  The CAP Code provides details of what information should be included.  In addition to the CAP Code you must also comply with the provisions of the Consumer Protection from Unfair Trading Regulations 2008.  This deals with the description of the prizes and how the prizes are awarded.

The CAP Code not only covers prize promotions on businesses’ websites but also those put on social media sites such as Facebook and Twitter.

If you have any questions with regard to prize promotions and sale promotions, please contact Lorna Kempsell at Edmondson Hall (lkempsell@edmondsonhall.com) or telephone 01638 560556.